Subject: 15-C-211 Proposed Changes
Author: "Paul O'Leary"
Date: 4/19/99 1:52 PM
April 19, 1999
Sir,
I have been managing money professinally in the micro-capitalization
area of the stock market for nearly 14 years. On April 21 of last year I
wrote the Commission regarding proposed changes to 15-C-211 because I felt
so strongly that the unintended effects of the proposal would be harmful to
the functioning of the capital markets.
I am disappointed to hear that a substantially similar proposal is
being considered now. Once again, the aim of cracking down on stock fraud is
noble, but requiring market makers to review and verify the accuracy of the
financial statements and/or business plans of issuers is not the way to go
about it. The regulatory burdens are signficant and the legal liability is
unquantifiable.
Putting regulatory and legal burdens on market makers, as opposed to
the perpretrators of criminal activity, will accelerate their withdrawl from
the business, leaving legitimate investors with less liquid and more
inefficient markets. Legitimate issuers, also, will see the cost of equity
capital rise as investors flee an increasingly illiquid, inefficient sector.
Companies in transition and newly formed entities are likely to be "red
flagged" and never have a chance to shine.
I encourage the Commission to conduct a thorough analysis of the
practical effects of the proposal on investors, issuers and capital markets.
Further, I would ask the Commission to work more closely with market
participants, such as the National Quotation Bureau, that understand and
appreciate the "real world" effects of your efforts to reduce fraud.
Sincerely,
Paul H. O'Leary
General Partner
Raffles Associates, LP
One Penn Plaza, Suite 4720
New York, NY 10119